IRA and the EU Single Market

The main consequence of not achieving an integrated financial market is that Europe will not be able to finance the huge investment requirements needed for its ambitions in the fields of climate transition, energy security, digital evolution, defense, etc… 

The EU is encouraging other countries to follow its lead and support the green transition. This requires massive subsidies in many different sectors.  Why should the EU then complain if other countries outcompete it in terms of subsidizing the production of green goods?   

With many new restrictive measures in place one would have expected trade to fall.  However, the most one can say is that globalisation has turned into slowbalisation. 

Elisabeth Braw, a widely respected expert in international relations and security, is currently a senior fellow at the Atlantic Council, a think tank based in Washington, D.C. Before transitioning to research, she was a journalist, a background that informed her recent book published by Yale University Press, titled Goodbye Globalization: The Return of a Divided World.

European automakers currently face increasing pressures. While the region’s manufacturers long dominated global sales revenues, several competitors from Asia have recently moved into the top ten.  But European companies have faced similar difficulties before, and the responses of the region’s automakers and policymakers to previous challenges offer insight for the present, especially on the issues of global competition and energy transition.  

The European manufacturers have different views on the new challenge from China and the potential outcome of the EU anti-subsidy investigation although it can be expected that the Chinese advance will go to the detriment of all European manufacturers.    

It is often assumed that Germany’s economic relations with China are so important that Berlin tends to take a softer stance on China-EU relations than its EU partners – or at least that this used to be the case until most recently. In particular, it is feared that German industry might be more vulnerable to disruptions of the supply of Chinese inputs than other European countries. However, this impression of a greater dependency of German industry and its supply chains from China is not borne out by the data.

This essay examines the international trade policies of the two presumed Candidates for president in 2024, Joseph Biden and Donald Trump. 

If the European Union wants to have a global economic weight, it must equip itself with great European banking champions capable of attracting capital globally and able to support Europe as a development platform.

On November 13, the Institute for European Policymaking co-organized with IAI, the Istituto per gli Affari Internazionali, an event in Rome dedicated to discussing the implication of the US Industrial Reduction Act on European industries and, specifically, on Italian companies.

On November 9th, the Institute for European Policymaking organized its first in-person event in Brussels: The Impact of IRA on the EU Industrial Policy: Challenging Conventional Wisdom.

Ralph Ossa, a professor of Economics at the University of Zurich currently on leave, has been appointed as the WTO chief economist in the most challenging time for the organization.  In the first World Trade Report since his appointment, Ralph Ossa and his colleagues challenge the prevalent narrative of an inevitable decline of globalization that we have experienced in the last three decades.  

The reduction in trade needed to achieve our climate ambitions would be out of reach. Border Carbon Adjustment is the way to go, but leakages remain sizeable.

L'Inflation Reduction Act (IRA), firmato dal Presidente degli Stati Uniti Joe Biden quasi un anno fa (agosto 2022), è il primo importante provvedimento per contrastare il cambiamento climatico che il parlamento degli Stati Uniti abbia mai approvato. La ragione principale di questo successo è che l’IRA non impone oneri all’industria USA ma garantisce molti sussidi.

A detailed analysis suggests that the handicap for European producers in the US market will be limited. This small negative effect is likely to be overwhelmed by the much-increased market, implying that the IRA leads to increased opportunities for exports of electric vehicles and renewable inputs to the US. Our calculations suggest that over time the US market for electric vehicles could increase by a factor of 4 and renewables installations should also increase by hundreds of percent. A commentary by Daniel Gros.

In this Working Document, we do not try to provide an overall evaluation of the IRA or its cost-effectiveness with regard to addressing climate change and US emissions. Rather, we investigate its impact on the US market and on EU export opportunities, concentrating on the material content of the IRA – not its intention.

As a possible reform of its dispute settlement procedures, the WTO membership should consider carving out trade actions taken under the national security exception (GATT Article XXI) as a case where trading partners have the right to bring non-violation claims but do not have the right to bring violation claims.

American protectionism has been reinvented in the name of “national security”. Yet, the belief that a country can achieve its own “nationally security” unilaterally is debatable.

So much international trade happens in dollars that it would be very difficult to turn the tide against the currency any time soon.